An in-kind donation receipt is a written record detailing the donation of physical goods or intangible services to an organization in need. The organization issues a receipt to the donor to maintain financial files and allow the donor to claim a tax deduction (if applicable). In-kind donations can come in many forms, so no two donation receipts are the same.
Table of Contents
- What is an In-Kind Donation?
- What to Include
- Gift Acceptance Policies
- Sample In-Kind Donation Receipt
What is an In-Kind Donation?
An in-kind donation is any donation in the form of goods or services. In-kind donations help charities implement programs, stretch resources, and divert financial contributions for operating expenses. Businesses and corporations commonly donate surplus inventory as gifts to non-profit organizations. It’s important to note – it’s always best to donate goods and services that directly support the recipient’s overall mission.
Donated goods can be new or used as long as they are in good, usable condition. Examples of commonly donated goods are:
- Books;
- Building materials;
- Cars;
- Clothing;
- Food;
- Furniture;
- Medical equipment; and
- Office equipment.
Examples of commonly donated services:
- Accounting;
- Advertising;
- Copyrights;
- Free-rent;
- Graphic design;
- Legal;
- Patents;
- Royalties; and
- Web development.
Is an In-Kind Donation Tax Deductible?
The tax deductibility of in-kind donations applies on a case-by-case basis. In the most basic sense, gifts of physical goods are deductible, but donations of services are not.
Physical goods hold a dollar value, called a fair market value. This value is whatever the donation recipient would have paid to purchase or rent the goods on the open market when they were donated. It is up to the donor to determine the fair market value of the goods so the recipient can include it on the donation receipt.
Any donated goods valued at more than $5,000 must get appraised by an IRS-qualified appraiser.
Donated time, services, or expertise hold no dollar value and are not tax-deductible, according to the IRS. The expenses associated with donated services, however, are tax deductible. For example, if a donor incurs parking, meal, or travel expenses while providing the donated services, those expenses are eligible for a deduction.
Tax incentives for businesses differ from those in place for individuals. Tax deductions are limited to an item’s cost basis (what it costs to make the item instead of the price it sells for on the fair market) for sole proprietors, S-corps, and partnerships. C-corps, however, can claim whatever amount is less between the following options:
- The midpoint between the cost basis and fair market value; or
- Double the cost basis.
To claim one of these enhanced deductions, a C-corp has to acquire a formal written statement from the receiving organization stating that the donation:
- Complies with FDA regulations (if applicable);
- Has not and will not be used by an unauthorized third party;
- Helps care for infants, needy, and sick individuals;
- Furthers the organization’s primary purpose; and
- Was not exchanged for money, property, or services.
Benefits of In-Kind Donations
In-kind donations can be simpler for donors when they can’t make financial donations. A donor also gets to see the impact of their in-kind donation immediately.
Charitable organizations benefit from in-kind donations in many ways. They get direct access to materials and supplies instead of purchasing or renting the same items. In-kind contributions allow charities to reallocate funds earmarked for goods to other vital expenses, like operations, insurance, or payroll. Finally, accepting in-kind donations allows charities to interact with their donors more personally, encouraging future gifts.
What to Include
The IRS requires all qualified 501(c)(3) organizations to include the following information on in-kind donation receipts:
- Charitable organization’s name;
- Donation date;
- Donor’s name;
- Organization’s EIN;
- Physical description of the non-cash contribution; and a
- Statement that the organization didn’t exchange goods or services for the contribution.
If the organization did exchange goods or services for the contribution, it must include one of the following instead of the final statement above:
- A physical description and an estimated value of the goods or services; or
- A statement that the goods or services consisted only of intangible religious benefits.
If the donor consents, it’s wise to include their contact information on the receipt. Suppose the donor provides their own estimated fair market value of the donation. In that case, the charity can add the valuation to the receipt if the donor includes a statement explaining how they determined the value.
Gift Acceptance Policies
Sometimes in-kind donations can be unusable for an organization. In these instances, a gift acceptance policy comes in handy. It institutes a charitable organization’s standards for accepting, acknowledging, and recording in-kind contributions. Creating a policy of this kind can prevent burdensome donations.
A well-crafted gift acceptance policy includes the following information:
- Acceptable donors;
- Acceptable in-kind gifts;
- Donation form requirements;
- Gift acceptance limits (quantity and value);
- List of in-kind gifts that require a formal gift agreement;
- List of in-kind gifts that require organizational review before acceptance;
- Prohibited donors;
- Prohibited in-kind gifts;
- Whether anonymous donations are accepted; and
- Written acknowledgment procedures.
In-Kind Donation Form
An in-kind donation form provides information about a donation that the receiving charity needs to produce a proper donation receipt. The donor completes the form and submits it with their gift. Collecting this information saves the charity a lot of time and effort and assures the donor they can claim the correct deduction on their tax return.
At the very least, an in-kind donation form needs to include:
- A physical description of the donation;
- The donation date;
- The donation’s fair market value;
- The method used to determine the value; and
- The donor’s name and contact information.
For a facilities donation, include all of the above except the physical description. Instead, have the public rental rate of the facilities, as well as the date(s) and hour(s) the organization used the facilities on donated time.
For a donation of services, include the date(s) of service, a description of services provided, the number of hours worked, and the public rate for the services.
Gift Agreement Form
Gift agreement forms apply to physically large or highly valued in-kind donations. Donors and organizations may need to come to specific terms regarding how organizations use these types of items. Executing a gift agreement provides security for both parties that all wishes will be fulfilled appropriately.
It’s advisable to include the following details in a gift agreement:
- Donor name;
- Donor’s purpose for providing the gift;
- Manner of delivering the gift;
- Organization’s intended use of the gift;
- Organization name;
- Organization’s responsibilities;
- Physical description of the gift;
- Start and end dates of the agreement; and
- Written acknowledgment details.
Sample In-Kind Donation Receipt
Charity Name: Oakview Food Bank
Street Address: 12345 Oakview Ave.
City, State, Zip: Oakview, FL 12345
Tax ID (Find on the IRS Website): 123-45-6789
Date: August 1, 2022
Donated By: Harry Jones
Donor Address: 12345 Oak Ln.
City, State, Zip: Oakview, FL 12345
| Description of Donated Item(s) | Quantity | Value ($) |
| can whole kernel sweet corn | 12 | $15.48 |
| antibacterial kitchen cleaner, 22oz | 1 | $6.39 |
| tall kitchen trash bags, 90 count | 1 | $15.29 |
Total Value of Donated Item(s): Thirty-seven dollars and Sixteen cents ($37.16)
Authorized Signature _________________________
Print Name _________________________